2 Stocks Split into High-Flying Stocks, Prominent Billionaires Sell & 1 Buy Hand over fist

Despite all the attention artificial intelligence (AI) has garnered on Wall Street, stock split euphoria has given AI a run for its money in 2024.

A stock split marks an event that allows publicly traded companies to cosmetically change their stock price and number of shares outstanding. It is shallow in the sense that adjusting a company’s share price and share count of the same magnitude has no impact on its market capitalization and does not affect its underlying operating performance.

Splits come in two varieties, with investors preferring one much more than the other. Reverse stock splits are designed to increase a company’s stock price, usually with the goal of securing continued listing on a major stock exchange. Meanwhile, forward-stock splits reduce the nominal price of a company’s stock. The purpose of forward splits is to make stocks more “affordable” to investors who do not have access to fractional stock purchases with their broker.

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Because forward-stock splits are performed by high-flying companies that almost always outperform and innovate their peers, this is the type of split that investors favor.

In the past six months, 13 high-profile companies have announced or completed a stock split, all but one of which was a forward-split:

Even though equities have far outperformed the benchmark since 1980 S&P 500 In terms of average annual returns in the 12 months since the initial split announcement, billionaire money managers have mixed feelings about this group.

Based on the most recent round of Form 13F filings — these filings tell investors what major money managers bought and sold in the past quarter — two of those stock splits were sent to the block by billionaire investors, while what actions of another were clenched fist.

The No. 1 Stock Split Top Billionaires Are Sending to the Chopping Block: Nvidia

The first split stock that billionaire money managers have actively shown the door is the hardware mainstay of the AI ​​revolution, Nvidia. The quarter ended in June marks the third consecutive quarter of significant selling activity by asset managers, with seven billionaires reducing their respective fund stakes (total shares sold in parentheses):

• Ken Griffin of Citadel Advisors (9,282,018 shares)
• David Tepper of Appaloosa (3,730,000 shares)
• Stanley Druckenmiller of the Duquesne Family Office (1,545,370 shares)
• Cliff Asness of AQR Capital Management (1,360,215 shares)
• Israeli Englander of Millennium Management (676,242 shares)
• Steven Cohen of Point72 Asset Management (409,042 shares)
• Philippe Laffont of Coatue Management (96,963 shares)

While profit-taking may play a key role in this ongoing selling activity — Nvidia shares are up more than 700% since the start of 2023 — it’s just as likely that billionaire money managers will become concerned about competitive pressures and of the history of the role. played with the following innovations.

Despite Nvidia maintaining a clear compute advantage with its graphics processing units (GPUs), the compute advantage alone may not be enough to avoid losing market share and valuable GPU pricing power its. With demand overwhelming, Nvidia’s supply and production partially blocked by its suppliers’ capacity and design flaws for the next-generation Blackwell platform, external competitors such as Advanced microdevices he should have no problem finding buyers for his tokens.

I’ll also add that all four of Nvidia’s top customers, accounting for about 40% of its net sales, are developing AI-GPUs in-house for their data centers. These complementary chips almost ensure a reduced reliance on Nvidia hardware for years to come.

However, history may be the most pressing concern of all. Every innovation over the past 30 years has endured an explosion event. Investors always overestimate the adoption and utility of new technologies, leading to eventual disappointment. When the AI ​​hype wears off, Nvidia stock will likely suffer.

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Shares divided into shares No. 2 Successful Billionaire Asset Managers Sell: Chipotle Mexican Grill

The second high-profile stock split that billionaire investors dumped on the crowd during the second quarter is fast-casual restaurant chain Chipotle Mexican Grill. A trio of billionaires were sellers, including (total shares sold in parentheses):

• Ken Griffin of Citadel Advisors (8,764,412 shares)
• Bill Ackman of Pershing Square Capital Management (8,384,035 shares)
• Ray Dalio of Bridgewater Associates (614,200 shares)

The name worth noting here is Pershing Square’s Bill Ackman, who has long held Chipotle shares (since the third quarter of 2016).

In many ways, Chipotle was firing on all cylinders. The company’s use of responsibly raised meat and locally sourced vegetables (when possible) resonated with consumers who want higher-quality, non-frozen food and gave Chipotle broad pricing power.

In addition, the company’s management team has remained disciplined in its approach to growth. By continuing to limit the size of the company’s menu, Chipotle’s staff is able to quickly prepare food each day, as well as speed up lines in its restaurants.

So why is it selling? The most likely reason why this trio of billionaires reduced their respective stakes has to do with Chipotle Mexican Grill’s valuation. While comparable restaurant sales growth of 7% in the first quarter and 11.1% in the second quarter is impressive for a chain the size of Chipotle, it doesn’t do much to justify a forward earnings multiple of 40. There’s only so much innovation that can be taken out of chain restaurants.

We also recently learned that Brian Niccol will step down as president and CEO effective August 31st and step into his new role as CEO of the coffee chain. Starbucks. Given how successful Chipotle Mexican Grill has been since Niccol’s arrival in March 2018, there may be concerns about the company’s ability to innovate and execute going forward.

Prominent billionaire stock split investors buy hand: Broadcom

At the other end of the spectrum is the Class of 2024 stock that half a dozen billionaire investors couldn’t stop buying during the quarter that ended in June. I’m talking about AI network solutions specialist Broadcom (total shares purchased in parentheses):

• Ole Andreas Halvorsen of Viking Global Investors (2,930,970 shares)
• Israeli Englander of Millennium Management (2,096,440 shares)
• Ken Griffin of Citadel Advisors (1,880,740 shares)
• John Overdeck and David Siegel of Two Sigma Investments (1,332,230 shares)
• Ken Fisher of Fisher Asset Management (865,090 shares)

Similar to Nvidia, Broadcom’s sails have been lifted by otherworldly demand for AI networking solutions. For example, the company’s Jericho3-AI fabric can connect up to 32,000 GPUs in high-computing data centers, thereby limiting end-to-end latency and maximizing the computing capacity of GPUs.

While this means Broadcom would be exposed to an AI bubble burst event, its sales channels are considerably more diverse than Nvidia.

For example, Broadcom is one of the world’s leading suppliers of wireless chips used in high-end smartphones. Telecom companies spending big to upgrade their networks to support 5G download speeds has led to considerable demand for next-generation wireless solutions amid a constant cycle of device replacement.

Broadcom also hasn’t been shy about using inorganic means to diversify its revenue stream. It acquired cybersecurity company Symantec in 2019 and more recently acquired virtualization and cloud computing software company VMware. The latter is to support Broadcom’s efforts to be a major player in enterprise private and hybrid clouds.

In short, Broadcom is better positioned than most AI companies to navigate a bubble-triggering event, should it occur.